Flight Centre Travel Group Ltd (ASX: FLT) shares were known as an attractive ASX dividend share before the COVID-19 pandemic occurred and smashed the global travel sector. Could the good times return for passive income?
The signs are certainly looking positive for the ASX travel share, with Flight Centre generating $95 million of underlying earnings before interest, tax, depreciation and amortisation (EBITDA) in the first half of FY23, beating its initial target of between $70 million to $90 million.
That represented a $280 million turnaround from the FY22 first-half loss.
The company reported that its first-half total transaction value (TTV) increased by 203% to $9.9 billion and tracked at 80% of the record FY20 first-half result. The corporate business is delivering record TTV and was "set to top $10 billion during FY23".
Flight Centre has targeted a 2% underlying profit before tax (PBT) margin by the end of FY25 and said there were positive margin trends.
Is this good news for Flight Centre dividends?
The ASX travel share didn't declare an interim dividend. Flight Centre said:
The company has initiated a review of its capital structures ahead of an anticipated uplift in earnings and cash generation. The review will consider the business' cash requirements to fund growth, shareholder returns and debt structures, including FLT's convertible notes.
Commsec estimates currently suggest that there will be no dividend from the company in 2023.
But, in the 2024 financial year, projections on Commsec indicate that Flight Centre might pay an annual dividend per share of 30.8 cents.
Then, in the following year (FY25), it might pay an annual dividend per share of 64.5 cents per share. Now, that payment would be lower than what was paid per share in FY10, so there's a long way to go for the business' payouts to get back to former heights.
Will earnings keep rising?
Projections are just an educated guess, but the forecasts on Commsec suggest that earnings per share (EPS) could be 30.9 cents in FY23 and by FY25, it could be $1.23.
The company suggested that through its "diverse global leisure and corporate networks, Flight Centre is also well placed to capitalise on pent-up demand as travel continues to recover towards pre-pandemic levels."
In FY23, Flight Centre is targeting underlying EBITDA of between $250 million to $280 million. It's expecting improving profit margins and will consider acquisitions to fast-track growth in sectors that it is under-represented in or to secure new models, revenue streams, systems or technology.
When it announced its result on 22 February 2023, the company said it continued "to monitor trading conditions globally but has not seen any noticeable impacts on customer trading patterns as a result of changing macroeconomic dynamics".
Things are looking promising for the ASX travel share over the next couple of years.
